Clean Distributed Generation

Distributed generation is the generation of electricity from sources that are near the point of consumption, as opposed to centralized generation sources such as large utility-owned power plants. Centralized generation facilities are widely prevalent in industrialized countries, the vast majority of electricity being generated by centralized coal, natural gas, oil, nuclear, and hydropower plants. While centralized plants have good economies of scale, they usually transmit electricity long distances, requiring more energy to make up for transmission and distribution losses.

Clean distributed generation systems, such as combined heat and power (CHP), reduce the amount of energy lost in transmitting electricity because the electricity is generated near the point of consumption, often even in the same building or facility. This also reduces the size and number of power lines that must be constructed. CHP is more energy efficient than separate generation of electricity and thermal energy because the heat that would normally be wasted in conventional power generation is recovered as useful energy for satisfying an existing thermal demand, such as the heating and cooling of a building or water supply.

Despite the economic, energy, and environmental benefits of distributed generation, such systems face market and regulatory barriers, which differ among states and utility territories. Regulations dealing with air emissions, interconnection, net metering, and standby rates can often determine whether a distributed generation project will be implemented.

Click a state to view its clean distributed generation policies.

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Within the realm of clean distributed generation, ACEEE focuses on six areas of policy:


California has CHP-friendly standby rates, streamlined interconnection standards for systems up to 10 MW, and emissions regulations that acknowledge the benefits of CHP systems by including a mechanism to credit useful thermal output.  The state also promotes CHP through financial incentives.  Its Self-Generation Incentive Program (SGIP) provides rebates for electric utility customers who install clean distributed generation.


New York

New York was the second state to adopt uniform interconnection standards for distributed generation systems, and adopted modifications in 2002 to streamline the application process.  In 2004, the maximum capacity of interconnected systems was increased from 300 kW to 2 MW and interconnections were expanded to the state’s more complex distribution systems, or “networked” systems, which exist in large, urban areas including New York City.  Through the New York State Research and Development Authority’s Distributed Generation and Combined Heat & Power program, the state has provided significant financial incentive and technical assistance to encourage CHP deployment.  Over the last seven years, these programs have invested over $94 million, about 75% of which has resulted in permanent equipment in the field with a capacity of about 192 MW.



Connecticut has developed interconnection standards applicable to CHP systems as large as 10 MW, and has established multiple size tiers so that smaller systems may benefit from easier interconnection processes. Its emissions regulations provide credit for thermal output for highly efficient CHP systems, and CHP is explicitly listed as an integral part of the state’s renewable portfolio standard.

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Related Publications & Documents

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